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Investing.com -- Snap Inc (NYSE:SNAP) shares dropped over 14% in after-hours trading Tuesday after the social media company posted a wider-than-forecast loss for the second quarter of 2025, raising fresh questions about its path to sustainable profitability. While revenue met Wall Street expectations and user growth remained healthy, investors gave a lukewarm reception to declining profitability and margin pressure.
Snap reported an adjusted loss per share of $0.16, slightly below analyst forecasts calling for a $0.15 loss. Revenue came in at $1.35 billion, rising 9% from a year earlier and matching consensus estimates, as ad sales and subscription growth supported the top line.
User engagement continued to climb, with Daily Active Users rising 9% year-over-year to 469 million and Monthly Active Users up 7% to 932 million. Free cash flow turned positive at $24 million, a sharp improvement from a negative $73 million a year ago, while adjusted EBITDA fell 25% to $41 million.
“Our global community continued to grow in Q2, reaching 932 million Monthly Active Users as we continued to invest in AI and augmented reality,” said CEO Evan Spiegel. “With meaningful inventory and conversions growth this quarter, including the broader rollout of Sponsored Snaps, we’re excited about the opportunity to translate improved advertiser performance into topline acceleration.”
Snap continues to place strategic emphasis on augmented reality and AI tools to differentiate itself in a competitive digital ad environment. Engagement with Spotlight, its vertical video feature, grew with over 550 million average monthly users and now accounts for more than 40% of total content time spent on the platform.
While global ARPU remains lower than larger peers like Meta Platforms (NASDAQ:META), Snap is making notable progress in monetization across its base. Other revenue, mostly from Snapchat+ subscriptions, rose 64% year-over-year in the quarter, reflecting traction in expanding beyond ad-related sales.
Investors, however, remain cautious as rising user engagement has yet to deliver significant margin improvement. Guidance for Q3 2025 wasn’t detailed in the release, leaving markets awaiting clarity on Snap’s runway for ad recovery and bottom-line stability.